Basic manufacturing can be the first step in climbing up the value chain
Basic manufacturing for other companies, the beginning of many companies, could pave the way to “the next Foxconn,” said Tran Ba Duong, chairman of the Truong Hai Auto Corp. (THACO)
Eventually an industry will transition from basic manufacturing to higher levels.
“An industry is like a tree,” Duong said at a forum on December 14. “To be strong, it needs a strong root system, which is the supporting industry.”
South Korea is an example of an economy that started out manufacturing simple products for Japan. Taiwan also began as a manufacturer of phones, bicycles, spare parts and other products.
Apple owns the design and creativity and distribution of its smartphones but hires other companies, like Foxconn, to handle the manufacturing.
“Simple manufacturing does not bring about large profits but everything starts there,” said Duong. “This helps Vietnamese businesses take a step upward to become companies like Foxconn.”
Dao Phan Long, chairman of the Vietnam Association of Mechanical Industry, said big companies need to lead in the supply chain so that smaller firms can follow.
“If Vietnam does not start improving its mechanical industry now, it cannot industrialize, he said. “Solutions are needed to improve domestic manufacturing.”
THACO recently established a $500 million factory in Quang Nam Province to produce mechanical parts. Duong said that the new company seeks to lead in the manufacturing of auto parts to help smaller manufacturers develop.
The government goal is to have a supporting industry meet 70% of domestic needs for auto parts with 2,000 companies being able to supply directly to assembly and manufacturing plants by 2030.
The government hopes to have the domestic manufacturing of auto parts (such as metals, plastic, rubber, electronics and electric products) meet 45% of domestic needs by 2025 and 65% by 2030.